Bitcoin and other cryptocurrencies experienced a downturn on Wednesday, as the crypto sector retraced some of its recent gains. Despite this, analysts remain optimistic about the future of digital currencies.
In the past 24 hours, Bitcoin has dropped 6.8% to $42,445. This pullback comes after Bitcoin surpassed $45,000 for the first time in over a year on Tuesday.
The primary driver for Bitcoin’s performance continues to be the potential approval of exchange-traded funds (ETFs) linked to its spot price. Several ETF issuers have revealed their planned fees for these funds, and launches are expected in the coming weeks.
However, concerns regarding ETF approval may have contributed to Bitcoin’s recent decline.
Matrixport, a crypto financial-services platform, released a report on Wednesday predicting that the Securities and Exchange Commission (SEC) would reject all ETF applications scheduled for January. Markus Thielen, Head of Research at Matrixport, stated in the report that if the SEC denies these applications, Bitcoin prices could temporarily drop to $36,000-$38,000. Regardless, Thielen still anticipates overall growth for the cryptocurrency in 2024.
Bitcoin ETF Approval and Volatility
If the Bitcoin ETFs do get approved, Bitcoin prices are likely to be volatile around the expected date for that approval. Analysts at J.P. Morgan have forecast that even if approval is given, it could be a “sell-the-news” moment.
Conflicting Analyst Views
However, other analysts have a more optimistic outlook on Bitcoin’s rally. Carsten Menke, head of Next Generation Research at Julius Baer, stated in a research note that the fundamental backdrop for Bitcoin is solid at the moment. He highlighted factors such as broad-based accumulation by long-term investors, slowing supply growth from the Bitcoin miners, and a high likelihood of eventual approval for physically-backed US exchange traded funds.
Positive Projections for Bitcoin
In a research note, analysts at AllianceBernstein suggested that Bitcoin could potentially reach around $80,000 by the end of the year. They attributed this projection to the potential approval of ETFs, the upcoming “halving” event scheduled for April, and growing demand from companies.
Ripple Effects in the Cryptocurrency Market
While Bitcoin faced volatility, it had an impact on other cryptocurrencies as well. Ethereum, the second-largest cryptocurrency, experienced an 8.1% decline, and smaller cryptocurrencies like Solana (-14%), Cardano (-12%), and Dogecoin (-10%) also saw similar downward trends.